Required: a) Given the managing director's concern about DK's approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product X Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct materials 35 40 45 Direct labour ($10 per hour) 40 30 50 In addition to the above direct costs, DK incurs annual indirect production costs of $1,044,000. b) Calculate the full cost per unit of each product using DK's current method of absorption An analysis of the company's indirect production costs shows the following: Cost driver Material ordering costs 220,000 Number of supplier orders Machine setup costs 100,000 Number of batches Machine running costs 400,000 Number of machine hours General facility costs 324,000 Number of machine hours The following additional data relate to each product: Product W Y Machine hours per unit 5 4 8 Batch size (units) 500 400 1000 Supplier orders per batch 4 c) Calculate the full cost per unit of each product using activity-based costing and briefly comment on the contrast to your results in part (b). N
Required: a) Given the managing director's concern about DK's approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product X Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct materials 35 40 45 Direct labour ($10 per hour) 40 30 50 In addition to the above direct costs, DK incurs annual indirect production costs of $1,044,000. b) Calculate the full cost per unit of each product using DK's current method of absorption An analysis of the company's indirect production costs shows the following: Cost driver Material ordering costs 220,000 Number of supplier orders Machine setup costs 100,000 Number of batches Machine running costs 400,000 Number of machine hours General facility costs 324,000 Number of machine hours The following additional data relate to each product: Product W Y Machine hours per unit 5 4 8 Batch size (units) 500 400 1000 Supplier orders per batch 4 c) Calculate the full cost per unit of each product using activity-based costing and briefly comment on the contrast to your results in part (b). N
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter12: Activity-based Management
Section: Chapter Questions
Problem 1CE: Cicleta Manufacturing has four activities: receiving materials, assembly, expediting products, and...
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